Dear Monty: Anxiety plagues first-time home buyers

Tuesday

Jun 27, 2017 at 9:48 AMJun 27, 2017 at 9:48 AM

Richard Montgomery More Content Now

Reader Question: We are looking for homes we can afford through online real estate websites. We are not married. We have extreme anxiety about actually contacting real estate agents and starting to look “for real.”

— I have money to buy or down payment — she doesn’t. We could afford up to $600,000. I have the cash to accomplish it. I have enough passive income to cover monthly payments up to 8 percent interest. We’ve discussed it, and she will sign papers stating the house isn’t common property when we get married, but she will receive equity she invested back, plus interest, in the event of separation.

— Houses under $300,000 in my area (basically gut and refinish types) are the target because we would prefer to buy something cheaper and put in the work instead. We have good contractors in our friend group.

— We worry about crime because the online crime map makes the area look horrible.

— Will people try and convince me not to pay cash?

— What about my area’s market outlook for 3-5 year timeline what with commuter train service expansion? Will tightened mortgage rules and the slowdown in area real estate sales the past couple months affect my area?

Monty’s Answer: The anxiety you are experiencing may be a result of either the lack of information, or conflicting information, or both. Consider such anxiety a good thing, as opposed to people who rush to the market confident, yet uninformed, wasting time and making costly errors. Let’s address each concern.

Extracting real estate from a broken relationship is one of the most frequent subjects from Dear Monty’s readers. Seek a legal opinion and guidance to have a partnership agreement drafted, or reviewed, by a real estate attorney.

Buying a fixer-upper and building equity with sweat is a sound plan. You want to work backward from the “as improved” condition of prospective purchases to the price you can pay “as is.” Verify those calculations at decision time against similar “for sale” homes requiring no work. Be careful about hiring “friends.” Being a friend has nothing to do with competency. Friends should be subject to the same vetting process as strangers. I get many questions about soured transactions with friends that contain the phrase, “but he (or she) was always so nice.” Here is an article about how to qualify contractors and other service providers that may be helpful: https://dearmonty.com/tips-for-selecting-a-builder/.

What is it about your area that keeps you there? Your reference to a commuter train suggests you live in a metro area. If correctly interpreted crime rates are high in your area, consider alternate suburbs. Have you looked at other municipalities? Also, a good real estate agent may offer conflicting information about crime rates that trumps your online source. The home buying process at https://dearmonty.com/home-buying/ explains how to find a good agent. You can gather the information you need from agents to make smart decisions as an integral component of the agent-vetting process. Testing agents in the selection process for their knowledge, efficiency, and honesty requires effort and diligence on your part. Be wary if an agent balks at sharing information unless you commit to them on-the-spot. Narrow your prospective agent list down to three finalists who have answered all your questions before making a decision.

There are advantages and disadvantages to paying cash. If this home is your home, and not investment property, there are many good arguments for paying cash. No one should be giving you advice about cash versus finance except your accountant because they know your entire financial situation and have no conflicts.

No one knows the future. Many agents working in your area will either not be familiar enough with the various municipalities around the city, or not willing to take the time to research MLS data to provide accurate insights on those locations. I suspect there are statistics for the entire county that may shed light on what reasonable assumptions can be drawn. The Regional County Planning office has more information about which areas are the likeliest to prosper.

You are on the right track. The local MLS is the only dependable source for the most accurate, up-to-date information. You are talking about your largest single cash outlay in your life. Take your time picking the best agent. Make logical, not emotional, decisions. You will feel the anxiety evaporate as you accumulate knowledge.

— Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.